The market-led organisation
The market-led organisation

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The market-led organisation

4.4 Marks and Spencer: a case study

The following case study examines a company coming to terms with market orientation.

Case study 1 M&S goes online to reverse crisis

Marks & Spencer is the latest UK retailer to turn to the web to revive its fortunes.

In the week that the company announced a halving in its pre-tax profits over the past year, Chairman Sir Peter Salsbury announced plans to roll out a national e-commerce strategy to develop closer relationships with customers.

Customers will be able to buy online selections from the M&S catalogue

Its current e-commerce trial, which is confined to staff on BT’s Intranet, will be extended nationally and will establish ‘the basis of a programme for customer relationship management’.

Using information from the online service, M&S hopes to develop its Chargecard customer database to target customers more effectively.

M&S is now looking to its new marketing department to help revive its sales. It confirmed that part of its change programme means placing more decisions with the marketing team.

M&S has confirmed that its pre-tax profits collapsed to 546 million for the year ending March 1999, compared with the £1.2 billion pre-tax profits it made in the previous year.

The retailer also confirmed that its share of its core market of clothing and footwear was down from 15.1% last year to 14.3%.

Figure 4: Spark out (Source: Credit Suisse First Boston (Europe))

Salsbury blamed the results on stronger competition in the retail sector in recent years, admitting that: ‘We lost touch with our customers and forgot about the competition. Those are quite fundamental for a retailer.’ He has swiftly cut costs. He is pushing decision-making down to the shop level and prying open the group’s inward-looking culture: ‘I would be disappointed if customers would not see a difference in a year’s time.’

M&S customers criticised the winter range for being too dull and dowdy, and opinions are split over the desirability of its current spring and summer clothing. Mr Salsbury assigns much of the blame to M&S’s powerful buying teams, who stock what they think people will like rather than listening to the store managers who actually meet customers. So he is devolving power away from buyers. He has also started to source more from overseas, to reduce costs and improve flexibility – vital now that cut-price rivals such as Zara and Gap are spreading along Britain’s high streets. The company may even drop its tradition of selling only its own brand, and slip in some designer names – it already uses British designers such as Paul Smith, although their labels are nowhere to be seen.

M&S has launched the first advertising campaign in its history, employed branding consultants, set up a marketing department and is about to appoint its first marketing director – rumoured, encouragingly, to be a heavy-hitting outsider. In a statement, M&S said that the creation of the marketing department was important in improving ‘analysis of the competitive environment, better information to inform buying decisions, more focused and proactive communication, greater clarity in presentation and display, and clear customer targeting’.

(Sources: based on Jardine, 1999 and a news item from The Economist, 10 July 1999)

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